Masefield AG v Amlin Corporate Member [2011] EWCA Civ 24 concerned an appeal brought by Masefield against the High Court’s finding (previously reported in our June 2010 issue, which report also includes full facts of the case) that the capture of Masefield’s biodiesel on board the Bunga Melati Dua was not an ‘actual total loss’ under section 57 of the Marine Insurance Act 1906.

Lord Justice Rix gave the leading judgment and found as follows:

  • There was no rule of law that the capture of a ship was an actual total loss of the ship or the cargo. Ultimately, it was a question of fact. Piratical capture, in the absence of a policy of ransom, may be an actual total loss, where the pirates escape with the ship for their own use and there is no prospect of its recovery. However, where, as in this case, there was not only a chance, but a strong likelihood, that payment of a ransom would secure recovery of the ship and cargo, its capture was not an actual total loss.
  • There was no legislation against the payment of ransoms in this jurisdiction (or in the rest of the world) and therefore it was not illegal. This was despite his realisation that the payment of a ransom, whatever it might achieve in the rescue of hostages and property, itself encouraged the incidence of piracy for the purposes of exacting more ransoms. He found that there was a “fragile status quo” that the payment of ransoms to pirates should remain legal. Accordingly, there was no identified public policy which could lead him to conclude that the payment of ransoms was “beyond the pale, without any legitimate recognition”.
  • Even if there was a public policy duty not to pay a ransom, that would not turn a potential total loss, which may be averted by the payment of a ransom, into an actual total loss. He seems to have regarded such matters relevant to the issue of whether there was a “constructive total loss” which is established where the cost of recovering the ship or cargo would exceed its value or where recovery of the ship is unlikely.
  • The payment of a ransom in response to threats to life or liberty was not prima facie a bribe, done for the purpose of obtaining improper advantage. However, he acknowledged that he was not concerned with the Bribery Act 2010 which does not come into force until later this year.
  • As the payment of a ransom was not illegal, it was recoverable from insurers under clauses providing coverage for “sue and labour” expenses.

This case confirms that whether a loss is an ‘actual total loss’ will depend on the facts and circumstances of each case. As a general guide, however, it would seem that there can be no actual total loss where there is a prospect of recovering the property, including the prospect of recovering a ship’s cargo by the payment of a ransom to pirates.

For further details please contact Nathan Hull (London) or Kimberley Cottrell (London).